Money Saving Expert Martin Lewis has warned energy customers against moving away from paying direct debits ahead of the new energy price cap on October 1.
The cap will remain in place until 31 December when energy analysts predict it could surge to around £5,400 in January 2023, and around £7,000 in April 2023.
The Don’t Pay UK campaign is urging Brits to stop paying their energy bills and cancel their direct debits in protest against the exorbitant bills.
However Money Saving Expert Martin has warned consumers that cancelling your direct debit could lead to higher bills in the long term, as the energy price cap continues to increase.
“You pay more per unit rate of gas and electricity if you pay in receipt of bills, however, the direct debit is based on the energy firm’s estimate of what you’ll use,” he said.
“If it’s estimating too high, or you don’t like it, you will get a short-term cash flow gain from switching to paying in receipt of bills – where they send you a bill and you pay for it each time.
“So, you might pay less money in the short-run from it, however, over the longer-run because you’re paying more for each unit of energy you use, you will pay more in receipt of bills.
“If you overpay on direct debit you are entitled to that money back in the long-run.”
Should you fix your tariff?
The financial expert explained there are no fixed-tariff deals on the open market right now, and to see if there is one available – you must contact your supplier directly.
What fixed energy tariffs are worth considering?
E.on Next Online v20: The one-year fix is on average 115% above the price cap, with the cost on typical use being £4,247 a year. There are no exit feeds, and E.on says it’s available to all existing customers.
British Gas Fixed Sep 23v4: This one-year fix is 133% above the price cap, and is £4,599 a year. It has a £200 dual-fuel exit fees and is available for all existing customers.
Ebico Living Prime 12 Saver July 2022 v2: The one-year fix is 138% above the price cap, costing £4,700 a year. This option is available to customers of all firms, and this is the cheapest open-market fix you can switch to without having to sign up for other services.
What has been said about fixed tariffs?
Octopus Energy has said it costs the company more than £4,000 to buy a year’s worth of energy from the wholesale market, which is why households shouldn’t rule out moving to a fixed tariff.
A spokesman said: “If a customer is looking for security and prefers to know how much they will pay for energy each month for the next year, they may want to fix their prices.
“If a customer prefers to wait to see if energy prices come down again over the next months, they could stay or move onto our SVT, and for example fix it at a later date.”
On his website, Martin wrote: “Many are paying double what they were a year ago, and another huge hike is expected in October.
“So understandably the big question I’m being asked is, ‘Should I stick on the price cap, or lock into a fixed energy tariff?’
“If you’re offered a year’s fix at no more than 95% above your current price-capped tariff, or 100% more if you very strongly value budgeting certainty, it’s worth considering.”